Council for Mutual Economic Assistance

Encyclopedia of Russian History
COPYRIGHT 2004 The Gale Group Inc.

COUNCIL FOR MUTUAL ECONOMIC ASSISTANCE

The decision to establish the Council for Mutual Economic Assistance, also known as COMECON and the CMEA, was announced in a joint communiqué issued by Bulgaria, Czechoslovakia, Hungary, Poland, Romania, and the Soviet Union in January 1949. Albania joined in February 1949; East Germany in 1950; Mongolia in 1962; Cuba in 1972, and Vietnam in 1978. Albania ceased participation in 1961.

COMECON members were united by their commitment to Marxism–Leninism, Soviet–style central planning, and economic development. COMECON served as an organizational counterweight first to the Marshall Plan and then to the European Iron and Steel Community and its successor, the European Economic Community.

COMECON was effectively directed by a group outside its formal organization, the Conference of First Secretaries of Communist and Workers' Parties and of the Heads of Government of COMECON Member Countries. The Soviet Union dominated COMECON. From 1949 to 1953, Stalin used COMECON primarily to redirect member trade from outside COMECON to within COMECON and to promote substitution of domestic production for imports from outside COMECON. The COMECON economic integration function was stepped up in 1956, the year of the Soviet invasion of Hungary, with the establishment of eight standing commissions, each planning for a different economic sector across the member countries. Notable real achievements included partial unification of electric power grids across East European members, coordination of rail and river transport in Eastern Europe, and the construction of the Friendship pipeline to deliver Siberian oil to Eastern Europe. In 1971 COMECON initiated a compromise Comprehensive Program for Socialist Economic Integration as a counterweight to integration within the European Economic Community. COMECON continued planning various integration and coordination efforts through the 1970s and 1980s. In 1985-1986 these efforts culminated in the Comprehensive Program for Scientific and Technical Progress to the Year 2000. With the loss of Soviet control over its East European trading partners, COMECON tried to survive as a purely coordinating body but was finally formally disbanded in June 1991.

COMECON's impact on Russia was largely economic. Russia was the largest republic among the Soviet Union's fifteen republics. The Soviet Union was the dominant member of COMECON. The strategic purpose of COMECON was to tie Eastern Europe economically to the Soviet Union. COMECON trade became largely bilateral with the Soviet Union, mostly Russia, supplying raw materials, notably tably oil, to Eastern Europe in return for manufactured goods, notably machinery and equipment. This is the opposite of the trade flow between historically dominant countries and their colonies and dependents. The historical norm is for raw materials to flow from the colonies and dependents to the dominant center, which exports advanced manufactures and services in return. The comparative advantage for Russia within COMECON was, however, as a raw material and fuel exporter. Russia's loss was that it received in return shoddy and obsolescent COMECON machinery and equipment rather than Western machinery with Western technology embedded in it. The Comprehensive Program for Scientific and Technical Progress to the Year 2000 was only one effort to remedy this problem. Russia also lost out on its potential gains from OPEC's increase in the price of oil beginning in 1973.

COMECON trade was conducted in "transferable rubles," basically a bookkeeping unit good only to buy imports from other COMECON partners. However, most purchases and their prices were bilaterally negotiated between the COMECON trade partners. So, the real value of a country's transferable ruble balance was indeterminate. Russian oil was sold by the Soviet Union to COMECON partners for transferable rubles. OPEC dramatically increased the dollar value of oil exports beginning in 1973. In 1975 COMECON agreed that the transferable ruble price of oil be indexed to the global dollar price, specifically the moving average for the past three years in 1975 and the past five years for every year thereafter. Thus, the prices of Soviet oil exports to COMECON lagged the global price rises through the late 1970s. Only when global oil prices dropped in the early 1980s did the transferable ruble price of Soviet oil catch up. Overall, the Soviet Union paid for its East European "empire" by selling its raw inputs, especially oil, for less than world market prices and by receiving less technologically advanced manufactured goods in return. Much of this cost was borne by Russia.

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Council for Mutual Economic Assistance

The Columbia Encyclopedia, 6th ed.

Copyright The Columbia University Press

Council for Mutual Economic Assistance (COMECON or MEA), international organization active between 1956 and 1991 for the coordination of economic policy among certain nations then under Communist domination, including Albania (which did not participate after 1961), Bulgaria, Cuba, Czechoslovakia, East Germany, Hungary, Mongolia, Poland, Romania, and the Soviet Union. Yugoslavia participated in matters of mutual interest. Although it was formed in 1949, a formal charter was not ratified until 1959. The charter gave COMECON the same international status as the European Economic Community (Common Market), but the structure was controlled by heads of state. COMECON undertook large-scale measures for organization of industrial production and coordination of economic development through a series of five-year plans (1956–85), but, despite attempts at integration, most trade was strictly bilateral; planned economies had limited mechanisms for transferring trade surpluses or deficits to third world countries. After increasing 400% for its first 15 years, trade among COMECON countries declined. Briefly a coordinating body only (Jan.–June, 1991), it was disbanded in June, when democratization, the collapse of trade and conversion to hard currencies rendered it redundant.

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Council for Mutual Economic Assistance

Council for Mutual Economic Assistance (COMECON) International organization (1949–91) aimed at the coordination of economic policy among communist states, especially in Eastern Europe. Led by the Soviet Union, its original members were Bulgaria, Czechoslovakia, East Germany, Hungary, Poland, and Romania; later joined by Cuba, Mongolia, and Vietnam. Cooperation took the form of bilateral trade agreements rather than the establishment of a single market or a uniform price system.

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